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US Rate Increase Boosts Dollar, Oil Falls

A 50 basis point increase in the Federal Reserve’s Discount Rate [1] lifted the dollar to a nine-month high against the euro. The increased confidence in the buck worked against oil prices, sending a barrel of light sweet crude down 99 cents to $78.07 a barrel. Brent North Sea crude for April delivery dropped 1.08 dollars to 76.70 dollars.

The Fed’s move sparked speculation that a rise in the main Fed funds rate might be closer than previously thought, boosting the dollar on hopes of an increase in yields on US financial assets.

“At the same time, hopes of a rebound in oil demand were dampened, but oil price losses seem contained, the more so as the inventory data published by the US Department of Energy (DoE) yesterday did not provide much cause for optimism,” said Commerzbank analyst Carsten Fritsch.

Source: AFP News [2]

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Scott Boyd

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